Speaking at an event organised by IMC Chamber of Commerce and Industry, RBI’s former Executive Director G Padmanabhan said, ‘for internationalisation, one of the things to happen is that increasingly the currency gets used for trade transactions. This (RBI’s rupee invoicing move) is definitely a step forward as far as internationalisation is concerned”.
DBS Bank’s Senior Economist and Executive Director Radhika Rao said rupee invoicing will help in establishing rupee’s role as the settlement currency internationally.
“It is a very timely and definite step towards an eventual internationalisation. Now this eventuality is few years to few decades away but nonetheless the timing of this circular has understandably drawn many to conclude quite swiftly that this is meant to be here now,” she said.
Rao, however, said that one should not see this announcement as a move to make the rupee stronger.
“It basically is more about expanding its (rupee’s) usage than pushing the currency in a certain direction,” she said.
The circular said that before putting in place rupee invoicing mechanism, Authorised Dealer (AD) banks will require prior approval from the Foreign Exchange Department of RBI.
“The bank of a partner country may approach an AD bank in India for opening a Special INR VOSTRO account. The AD bank will seek approval from the Reserve Bank with details of the arrangement,” it said.
Padmanabhan said with this approval process, the central bank wants to keep a tab on whether the accounts are getting opened for the purpose they are intended for.
“Who is opening the account? Which country is opening the account? What kind of transactions are happening? Initially, RBI would like to keep a tab of what is happening. So, this approval process has been put in place,” he added.